Can You Roll a 529 Into a Roth IRA?

Can you roll a 529 into something else

Unused 529 funds may be converted to Roth IRA assets without incurring the 10% penalty, though this process can be complex and challenging.

The Internal Revenue Service allows one tax-free rollover per beneficiary per 12-month period; any more will incur federal income tax and a 10% penalty on earnings.


A 529 account is a state-sponsored investment account designed to allow parents and guardians to save for college tuition, fees and other qualified educational expenses such as community college attendance or registered apprenticeship programs. Depending on your state of residence, tax breaks may also be available to you.

Prepaid tuition plans provide another means for funding college. Offered in several states, prepaid tuition plans allow you to lock-in current tuition rates for future students (usually your child or grandchild) at current levels – with non-qualified withdrawals subject to taxes and a 10% penalty fee.

Thanks to a new law that went into effect in 2024, you now have the ability to transfer funds from unused 529 accounts into Roth IRAs for their respective beneficiaries tax-free without incurring penalties or income tax liability – meaning savings will continue growing tax-free for retirement purposes. This change applies only to accounts open at least 15 years prior.


Families that have money accumulated in 529 plans that they no longer require may now transfer it directly into Roth individual retirement accounts without incurring penalties, however there may be certain restrictions that must be considered first.

This new law only affects unused 529 plan funds saved for a child or grandchild of the beneficiary and saved through family, spouse or domestic partner plans, estate or trust arrangements. Withdrawals from such accounts can still be made for qualified education expenses such as tuition fees, room and board, books, technology services and other educational services.

Funds may also be placed into a Coverdell education savings account; however, withdrawals made outside of educational use can incur taxes and penalties; prior to making any decisions regarding this method of saving, it would be prudent to consult a financial professional first.

Money Market Account

A 529 plan provides tax-deferred savings accounts to aid with qualified education expenses, offering state income tax deductions in 35 states without annual gift-tax limits and offering investment options such as mutual funds with diversification benefits.

Investment in the stock market can be unpredictable, and many college savings plans suffered significant losses during last year’s steep correction. Unfortunately, some parents whose children are attending their first or second year of college now face tuition bills that exceed what was saved from last year.

Unused funds may be rolled into a Roth IRA for their beneficiary as an effective retirement savings vehicle for children. There are certain restrictions, though: total rollover amounts must not exceed $35,000 and accounts must have been open for at least 15 years; to reduce tax complications it’s also important to carefully document everything by making withdrawals directly from the plan to the institution receiving payment.


If you have money saved in an individual retirement account that you want to put toward your child’s college education, there are several ways that can help. Either take a direct distribution from your IRA, or roll the funds into a 529 plan or other college savings account – with any such transfers subject to regular income taxes as well as possible hefty 10% penalties if done before reaching age 59 1/2.

Each state’s 529 plan offers different investment options and limits, and anyone can open one for themselves, their children or grandchildren; anyone can even be designated as beneficiary. Withdrawals made for qualified education expenses like tuition fees, room and board payments or books are free from federal taxes while earnings withdrawn for non-qualified expenses such as gambling may incur a 10-percent penalty tax payment from custodians.

Raymond Banks Administrator
Raymond Banks is a published author in the commodity world. He has written extensively about gold and silver investments, and his work has been featured in some of the most respected financial journals in the industry. Raymond\\\'s expertise in the commodities market is highly sought-after, and he regularly delivers presentations on behalf of various investment firms. He is also a regular guest on financial news programmes, where he offers his expert insights into the latest commodity trends.

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